ATLANTA — Georgia’s need-based, low-interest student-loan program has a high default rate that serves to limit its success, a new state audit has found.

About 31% of borrowers participating in the Student Access Loan (SAL) program default within three years of entering repayment, the Georgia Department of Audits & Accounts concluded in a report issued late last month.

That’s more than three times the default rate of federal student loan participants.

“Borrowers were more likely to default if they were enrolled in a technical college (vs. a four-year institution), were eligible for the federal Pell Grant, did not receive HOPE or Zell Miller aid (with the exception of the HOPE Grant), or did not earn a postsecondary credential prior to repayment,” according to the audit.

“We also found that on average defaulted borrowers earned approximately 40% less than those who remained in good standing.”

Since its inception in fiscal 2012, the SAL has provided about $266 million in loans to nearly 36,000 students. SAL receives $26 million in Georgia Lottery proceeds each year to help borrowers with postsecondary costs.

Since the lottery-funded HOPE Scholarships program is purely based on merit, the SAL is the primary vehicle for need-based student aid in Georgia.

Because of the HOPE and Zell Miller Scholarship, which goes to HOPE recipients with the highest grade-point averages, Georgia awards more grant dollars per undergraduate student than any other state in the country. However, Georgia devotes a smaller proportion of its state assistance to need-based aid compared to other Southeastern states.

The audit concludes it’s no surprise a program that primarily attracts low-income students would suffer from a high default rate.

The report recommends that the General Assembly codify into state law SAL’s intent and define the program’s goals and priorities. It also suggested the Georgia Student Finance Commission consider easing some of the program’s overly burdensome repayment terms.

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